Nasdaq cuts prices on data products

Technology touted by NYSE, ECNs, Nasdaq

SteveGelsi

NEW YORK (CBS.MW) -- Investors large and small are benefiting from a market-data price war just as interest in the stock market is picking up.

Nasdaq last week was the latest to cut prices, slashing the cost of its in-depth quote service to a mere $14 from $150 as it grapples with competition from upstart ECNs.

The new service, called "ViewSuite," combines the previous Level II service with the more recent "TotalView" product.

ViewSuite provides more detailed quote data for quick stock trading, compared with cheaper, more widely available information on the last price for a stock and the current best bid and ask. It shows the bids and asks from the stock's market makers, as well the number of shares they're willing to buy or sell at that price.

Nasdaq hopes the lower prices will help it convince the 75,000 current subscribers to its Level II quote service to move up to its new trading platform.

Adena Friedman, Nasdaq's executive vice president of data products, said the exchange first tried to cater to different niches of its customer base with tiered pricing, but scrapped that in favor of a flat price of $14 per month for ViewSuite.

"It turns out that everyone wants everything," Friedman said. "We wanted to understand the demand for the product and now we're offering a better price."

The new product provides the names of the market participants and the prices and aggregated size of their attributed quotes and orders.

For the most active traders, such data can provide ways to make quicker money on stocks.

About 60 market data distributors such as Bloomberg, Ameritrade, CyberTrader, Lava Trading, Reuters, Stockwatch, and Thomson Financial are offering ViewSuite to their institutional and individual customers.

Rampant price slashing

While market experts hailed the move overall, it doesn't solve the Nasdaq's bigger problem of market share and price wars in the marketplace for trading Nasdaq-listed stocks.

Nasdaq's price cut comes as it continues to face competition from electronic communication networks such as Instinet and Archipelago.

"They're all beating themselves up over price," said analyst Rich Repetto of Putnam Lovell

In another recent pricing move, SunGard Brokerage Services, a unit of Sungard
SDS, -0.21%
said it would introduce a lower pricing structure for data on its BRUT ECN for high volume customers.

The price cutting comes as interest in the stock market picks up from both institutional and individual investors. Volumes are well ahead of year-ago levels.

The Nasdaq, the New York Stock Exchange and other rivals in the equity trading game are dangling more data products to woo business.

The Nasdaq continues to tout the power of its SuperMontage system, which was designed to provide a unified trading platform for ECNs.

Instead, its rivals have consolidated and are using their own trading systems.

Nasdaq's Friedman acknowledges that other ECNs offer their own platforms and that the Nasdaq faces a "fragmented world."

But the exchange continues to work with data vendors to offer better integration of trades from other ECNs

Despite the competition, data sales are a growing part of the Nasdaq's revenue, although the exchange doesn't report it separately.

ECNs have an advantage

"The data products are valuable if they give you ... a better sense of what's happening in the market than without them," said Jim Angel, a Georgetown University finance professor who studies the Nasdaq. "If they tell you something valuable, they're worth paying for."

The Nasdaq has a smaller market share in low-priced stocks partly because the ECNs allow traders to post narrower differences between bid and ask prices.

Someone who wants to jump the queue for a trade can do it more easily on an ECN by offering a fractional price, Angel said.

The Nasdaq also faces structural challenges. ECNs are regulated as broker/dealers with direct access to the trading platform, while Nasdaq customers have to go through a market-making firm to trade. The Nasdaq also faces additional regulations as a stock market exchange.

The Nasdaq is also losing business from proprietary trading firms such as Electronic Trading Desk, who would "rather get orders in through Instinet or Archipelago," Angel said.

NYSE beefs up its data

Over at the New York Stock Exchange, the latest data product being offered to institutional players is LiquidityQuotes.

Market makers on the floor of the exchange are now offering stock based not just on price, but on the best liquidity deals at any given moment.

"It's part of a process to make the marketplace as transparent as possible," said Ron Jordan, vice president of the NYSE.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.